Mark Twain once wrote that "a country without a patent office and good patent laws was just a crab and couldn't travel anyway but sideways or backwards". Let us look at the US - the mecca for patents. It is today, despite recent problems, the most powerful nation in the world. This is probably driven by its penchant for patents. The founding fathers, those who framed the American Constitution, saw the justification in giving monopoly for a limited time as a reward for invention. This was an incentive to create and encourage business for the new nation. For the first time in the history of the world, a constitutional instrument recognised that individuals had the right to protect their intellectual property (IP).
Thomas Jefferson, the third American president and the only other person to have also served as secretary of state and vice-president, was also the young nation's first patent commissioner. He spoke of patents as "locomotives that run industry". Little did he know that the patent laws that he put in place would propel the US to the status of global superpower in less than 180 years.
As most goods are offered on the open market, manufacturers can gain competitive advantage by preventing copycats. This may seem contrary to the concept of free market. But in truth, IP helps rather than hinders the economy by encouraging innovative work the real engine of growth.
With a patent, an inventor can control the design, manufacture, licensing, distribution and copying of his inventions. A patent is in effect a temporary monopoly over a specific device or process.
Patents are by nature competitive instruments - they prevent your competitors from practising your invention. They can be used to force competitors to change their products and marketing strategy. However, this assumes that the competitively valuable space is protected. Simply put: The purpose of patents is to keep others from duplicating your invention.
Benefits of a patent
• Marketing. Customers are always looking for the "next new thing". Patents represent "newness" as "novelty" is the key to successful patent applications. Patents also represent "R&D", which everyone likes. Patents are also third-party endorsements as they need to be vetted by the unbiased officials who man patent offices worldwide.
• Revenue source. Patents protect owners in terms of pricing and allow the product or service to fetch higher prices. This secures better revenue and profit.
• Bargaining chip. Owners of patents have better bargaining power when dealing with employees, competitors, customers, collaborators, reg-ulators and financial institutions as well as markets. This will be especially so when business becomes more knowledge-intensive.
• Industry control. Patents create monopolistic positions for owners. When used effectively, patents allow companies that own them control of a particular industry. This is the classic strategy of companies like IBM and Sony.
• Defending market niche. By creating a monopoly, patents enable companies that own superior abilities to defend niches in the market that they want to be strong in. This has been the strategy of pharmaceutical and biotech companies.
• Prevent being shut down by new markets and technology. Patents allow your company to be more resistant to challenges of technology obsolescence and market shifts that might shut you down. The richest man in the world understood that. In 2004, he set a new target for this company, Microsoft, to beat IBM in terms of patents filed.
Indeed, a cursory look at this July / August's issue of Fortune's Global 500 Rankings is quite revealing. American multinational companies lead with 153 followed by Japanese companies with 64. Japan is a patent-hungry nation as are the many European nations that figure strongly on the list. Looking at the Malaysian scenario, our national patent policy looks good on paper. But is it spurring national competitiveness which will turn us into a developed nation? This question needs a hard and honest answer. Or else, I see a blame game erupting as we get closer to 2020 and realise we are miles away from developed status.
Datuk Dr Rajen M is CEO of Holista Biotech Sdn Bhd
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